Blog

I was listening to a lecture by Roderick Long this morning, entitled “The Moral Standpoint” which is part of the series “Foundations of Libertarian Ethics: A Philosophy Seminar” (Available from Mises.org).

In this lecture, Dr Long (who I enjoy and admire, not the least of which because he is very funny and charming in person) attempts to analyze the reasons for the popular rejection of libertarian solutions to political problems.

And while I agree with Long’s arguments, as far as they go, I also understand, that the resistance to libertarian solutions, of which there are many, is the preservation of status that comes from the fog of our current, ambiguous, and unclear political order.

In general, libertarian solutions propose fact-generating, and evidentiary solutions that expose causality. I tend to talk about these category of solutions as ‘calculable’ in the sense that they provide sufficient information to assist us in making decisions, and they do not permit the ‘laundering’ of causailty by the pooling of accounting information.

THe problem with the clarity of libertarian solutions is that people enjoy the ‘fog of reality’. THe same way we all believe we are in the upper ten percent of our fields, we all believe we are contributing members of society, when in fact, we cannot all be in the upper ten percent of our fields, and it’s quite demonstrable that the only contribution most people make to society is to cause work for others, to provide local clerical or manual labor, to refrain from stealing so that we can create the institution of property, and to fill land so that others don’t take the earth’s potential from us.

We do not want a clear mirror in which to see our true reflection, but a foggy one, that preserves our self-illusions – illusions that help us exist in a division of labor where indeed we may have little importance or relevance to one another, while at the same time, benefiting from the vast decreases in costs that such a division provides for us. We trade our ability to perceive causality for our mutual prosperity.

Our status, which is, effectively, our access to mates, and often access to social groups, is more important for the political and lower classes than it is for the high performance (merchant and finance) sectors, who achieve that status by causal means in a division of labor, under the institutions of trade and exchange.

My argument, which is contrary to general libertarian propositions, is that redistribution of profits from interest are the only means of resolving this status conflict – we have to pay other classes.

And that the libertarian political strategy is effectively to propagate it’s value system, under the guise of moral or religious traditions, which it cannot, because it is against the status advantage of the less meritocratic classes.

And while the libertarian position is to return to the gold standard, or some variation of it, the problem with that position is that, as the division of labor and knowledge increases, and especially as we urbanize, credit is the only means of preserving the social order – which means respecting property – as well as an identity for encouraging cooperation that was perviously created by nation, religion, village, tribe and family. Just as laws are a punitive system that apply to all equally (hopefully), credit is an incentive system that is more effective than law, because it does not require policing, just recording. And incentives under credit, are positive, and under law, negative.

Furthermore, we need insurance provided through fiat money, or at least common money.

Otherwise we are privatizing wins and socializing losses. The problem with the Rothbardian concept of banking and money is that in the end, it privatizes wins and socializes losses. This is justified in that model under a number of guises.

however, what Rothbards model (and Mises as well) ignores, is that in order to create the institution of property people must forego their opportunity to employ violence. This redistributes violence across people who DO respect property. And therefore, any group of people who deny violence in order to create property, redistribute their violence and thereby pay opportunity costs. As such, a failure of profits from credit to be redistributed are a theft, and redistribution is mandated.

By avoiding this conversation (or not understanding it) Mises and Rothbard, as well as libertarians in general, circumvent the problem of maintaining land, and creating the institutions of property.

The poor, as long as they are not immigrants (who under this model are thieves – explaining peoples reaction to immigration) by respecting property, and denying violence, are due redistribution, which explains their use of violence (their repossession of their contributions). And a failure to redistribute a portion of profits is simply theft from them. CRedit and interest are the means by which we can do so, if, in the end, we are borrowing from them.

Like this:

….a bank should be required to keep all loans it makes on its books until maturity.

In under six hundred words he provides a solution to a great deal of the problem. I’ve extended this basic line of reasoning to explain WHY banking should be run this way, WHY the public should and must insure banks, and WHY we can provide redistribution using these institutions, and HOW to look at government differently. But then I’m trying to solve the broader problem.

To determine how we must govern, we must agree on what life we desire. To agree on that life we must understand what kind of creatures we are. These two statements are as old as philosophy itself. However, these ancient questions are formulated with an assumption about our power of decision making: we may not be able to make decisions with out the institutions that help us do so.

The civic republican tradition of political participation assumes we can make such judgements, or that we need only philosophical knowledge or religious tradition to do so. When, at some level of complexity we cannot sense the data with which to make these decisions in any possible way.

I’ve included the article here in it’s entirety for posterity.

Winterspeak
The Public Purpose Of Banking
THURSDAY, NOVEMBER 12, 2009

The Public Purpose of Banking
While Lloyd Blankfein claims bankers are worth Billions, even as they destroy Trillions, it’s worth taking a look at what the public purpose of banking is. Chicago economists, sit back down, the public purpose of banking is not to enrich their shareholders any more than the public purpose of pharmaceutical companies is. Capitalism works by enriching owners as they compete to provide some value to customers. So, what is the value that banks deliver to their customers?

First, what is a bank? My definition is simple and goes to the heart of their public purpose: a bank is an entity that has a reserve account at the Fed. That is it. If you have a reserve account at the Fed, it means you can lend unconstrained by your reserve balance. Briefly, this is how it works:

1. You make a loan. This debits your reserve account, and you credit a receivable account.
2. The loan gets deposited, which credits that reserve account, and credits a liability. Note how the loan created the deposit, not the other way around.
3. If the loan and the deposit are made at the same institution, that institution has no net change to its reserve levels. If the loan and deposit were made at different institutions, then the institution short reserves borrows what it needs from the institution long reserves overnight. That’s it.

If you or I make a loan, we cannot use the reserve credit that the corresponding deposit creates to top up our own reserve levels. Thus this clear, operational difference between banks and non-banks.

Ultimately, the Govt creates all reserves, so why not just have the Govt make loans directly? Because we do not want the Government to make credit decisions, they are too likely to dole out money to politically connected constituencies, while starving worthwhile, but unconnected borrowers. You can see this today, as banks and unions get Billions, while shop keepers, dry cleaners, manufacturers, and restauranteurs shutter their businesses and go on the dole. An institution that makes loans it knows will not be paid back is not making loans at all, it is making gifts, and the operational bankruptcy of the FHA is a great example of this in action. Many adjectives come to mind: corrupt, wasteful, abominable, unfair, fraudulent, etc. This is the opposite of Responsible Governance. Barry, we really expected more.

So, to keep responsible lending, we put private capital infront of public capital and ask that private capital take the first loss on loans it makes which turn out to be bad. Ultimately, taxpayer money is there as backup, but it should not be directing investment. We call this institutional arrangement a “bank”.

This simple sensible construct is utterly lost on policy makers and the commentariat alike. For banking to do the job it is meant to do (ie. make loans that will be paid back), a bank should be required to keep all loans it makes on its books until maturity. It should be forbidden to participate in any secondary markets, in any way. It should not run a prop trading desk. It should not sell insurance. It should not have a fee-for-service business. It should simply conduct its own credit analysis, make loans, and service them. And in return for providing this public purpose, a bank shall have a reserve account at the Fed.

Like this:

The crisis over climate data has been met with numerous statements about preserving the “sanctity” or trust in the wisdom of science and scientists. As if our scientists were an improvement over their theological predecessors, or their pragmatic and prostituting peers in politics. But that can hardly be true, if one understands the history of science, or the scientific method and it’s limits, or the behavior of human beings belonging to schools of thought, in history. People are driven by material gain, status, and power, and have significant cognitive biases in favor of those selfish traits, that appear in all aspects of human behavior, not just in politics, commerce, or religion, but also in science.

My position has been, along with many, that it certainly appears as though the data says the climate is cooling, along with it’s normal historical ice age cycle.

The public does not trust academia, or the scientific community. It does trust particular scientists who are also public intellectuals. THe press likes to trust and advocate science because secular humanism has become today’s religion. In an effort to counter scholastic religion, secular humanists frequently tolerate what it considers acceptable losses.

But given that, due to current events, we know most mathematical economics since the second world war is faulty, because the logic behind it was faulty. Because they sought to justify government intervention in the economy by monetary policy: Something Hayek believed was the intellectual’s fascination with their levers and their desire to run tests on society to experiment with their efficacy.

And there are numerous other ‘givens’.

Given that over nine tenths of research papers contain logic errors that invalidate their conclusions, whether in physical science or social science.

Given that it at least appears that the peer review method of publishing articles is becoming invalidated when compared to the more difficult job of writing books that require broader integration of a paper into a network of theory.

Given that our universities are rated by input rather than output criteria, and that this bias has material impact on society.

Given that it certainly appears that there is a great deal of ’skewing’ in the community, on top of the pervasive errors in the logic of conclusions.

Given that academic departments are not materially meritocratic, but political – and radically so.

Given that we produce large bodies of research that are faulty and repeatedly proven faulty whenever they aspire to affect the political debate, in order to make it easier to obtain grants.

Given that academia does not separate teachers from researchers, and that students see their best teachers evicted from universities, for what appears to be political interests of intrenched parties, and all of us who are educated walk around with this knowledge and experience.

It becomes somewhat hard to understand why the public should believe in the myth of scientific ethics.

Scientists pursue self interest, just like the rest of us. But there are no checks on that self interest when the testing criteria for that self interest is obscured by all the behaviors above. The rest of us are tested by the market.

And it appears that the market is a much better test.

Scientisim has replaced theology as a means of influencing policy. But I’m not entirely sure it’s all that much better than arguing about angels on the head of a pin. It certainly seems we should be at least as skeptical of our scientists as we were of our theocrats.

And perhaps more so.

Adam Ozimek

Curt,

The scientific community is a market; a market of ideas. You should not put more stock in individual scientists or “public intellectuals” than in scientific consensus and the market of ideas in which consensus if forged and challenged. The market for ideas is as competitive, self-interested, and as meritocratic as most other free markets- all of which share problems like you cite above.

@Adam

“The market for ideas is as competitive, self-interested, and as meritocratic as most other free markets- all of which share problems like you cite above.”

That *cannot* be true.

The market has no claim to truth, nor is it a weapon of political coercion. It is ultimately and entirely pragmatic, and the means by which we fill each other’s wants by the pursuit of self interest, at the lowest cost, despite the fact that all people seek to game, or circumvent that market whenever possible.

Markets exist, and always have. The state has generally, created sufficient stability so that markets can evolve in a fashion in which only the government molests them. And the government molestation is determined as good or bad only by how it redistributes the profits of its molestation: to itself or to the public. A public who must also fail to molest itself by interfering with trade or property, as well as refrain from molestation of the state.

But, the moment that ideas are used to influence government policy, they make claims to truth. Our concept of truth is as a method of coercion.

In the context of this discussion, which was the public TRUST in the scientific community, trust must imply truth not pragmatism. Otherwise the conversation is meaningless.

Like this:

The difference between the schools of quantitative and behavioral of economics consists largely in which errors they choose to accept in furthering the utility of their craft.

Each of these schools masters a set of conceptual levers with which they seek to solve problems. Or more realistically, the people in the school learn levers, and define their schools by the limits of those levers. They explore their field with levers. They do not necessarily even understand, or agree upon the problem they are solving with those levers. Often, they redefine the problem by the levers at their disposal – a form of unintentional circular reasoning that is rarely evident except in retrospect.

A lever is something that they can use to run a test. Testing is the sensory tool of science. But more clearly, methods and their tests are extensions of human perception. Think of them as an insects antennae. They sense whatever they are designed to sense. But it is up to humans to synthesize that new sensory data into a cogent whole. The problem occurs when our specialists become so enamored of their sensors that they bias their perception of the whole, as something designed to be explored by the sensors at their disposal.

Like any school of thought, the limits of that school are determined by the methodological scope of it’s levers, what effects they ignore, or what priorities the school’s practitioners give to which effects either considered or ignored. Most often, practitioners become enthralled with the levers they best understand. These ignored effects, and preferred levers, constitute errors. THey must be errors, if they eliminate or ignore information — information that may be either influential to the test, or influential to secondary causes.

My favorite response by economists is “… but we don’t consider that economics, so we dont consider this a problem for us to solve.” When in fact, economics is simply the school of measurement of the social sciences, when we choose to make material improvements in life — due to the increasing division of labor and resulting decrease in prices – our method of determining political policy. Economists then ignore the secondary causes of their research: they seek to justify a tool, rather than follow a chain of causation.

In the quantitative (abstract) and experiential (experiential and logical) schools of economics, participants either err on the side of understanding human behavior in favor of models that support levers of government intervention, or they err on the side of understanding that there are consequences to policy in the absence of knowledge about secondary causes. The difference in priority between the quantitative and the behavioral, is simply the priority that each gives to it’s methods. They seek to solve the problem from different ends of the human spectrum.

For example, the behaviorists did not understand the stickiness of prices and contracts over time, nor the importance of having sufficient money in the system, nor the problem with their concept of freedom, its relation to property, property to calculation and incentive, or the epistemology that property permits humans to employ.

The quantiatives did not understand number of very important things, primarily the nature of entrepreneurship, the limits of the DSEM (dynamic stochastic equilibrium model) the nature of what numbers can represent as categories given that factors of production, and even all objects in human experience, have different utility at different times. Nor did they understand how important habitual knowledge, (traditions and habits) are in society, and how quiclky humans forget them when they are not of daily use due to social programs or credit money, inflation, or taxation.

Nor did any of them understand that the problem we faced was the nature and dependence of society on human calculation itself, and that accounting practices, government by and laws, as well as the democratic system of government, are effectively laundering useful causality from the pricing system, as well as distorting it through the use of excess credit money.

This axis of differences between abstract quantitative and experiential logical is intersected by those people that err on the side of institutional conservatism as a protection against fashion or err on the side of institutional change as a means of altering society by way of its institutions of cooperation and conflict resolution. However, both ends of teh spectrum ignore either the opportunity for change in preference for risk against institutions, or ignore the impact on institutions in favor of experimental change.

And these differences are not minor or meaningless. It is the difference in the philosophy of giving people tools by which to better themselves and others, by fulfilling wants, and rewarding those who do so, and the opposite camp, which desires to change the status of humans at the discretion of the political managers who can achieve the power to pull the levers of their choice, and create class conflict over the spoils of productivity gain.

The debate rages. However, it appears, at least after cautious study of the history of ideas, that experiments that extend our institutions of calculation are those that are material investments in humanity. And those that are more fashionable, are minor adjustments to class, power, and material randomness as we fitfully pursue life.

Our problem is not economics. It’s calculation. Our political system is destroying our ability to calculate – because it’s members do not understand the underlying problem of human calculation, nor the need to modify government to facilitate it.

That change, that one change, is the single most important modification we need to make to our institutions.

Redistribution becomes calculable under that model. Class warfare becomes unnecessary. And to support Durkhiem, it prevents the state from suppressing freedom and individuality, because it no longer needs to, nor does it need to be a costly behemoth sitting on top of our society, nor can it, because it’s worth would be measurable.

That is the methodology that we need: measurement of causality.

Prediction is simply a silly chimera to compensate for the lack of information because we launder causality from our political efforts, and to justify the pulling of levers of government through taxes and laws because we lack that measurement and the information it contains.

And if my argument appears to favor both sides, yielding confusion rather than clarity, it is because we must continue to compensate for the practical reality of human frailty and foible, while creating institutions that allow us our political expression as a vent for our frustrations, while building a set of institutions that make our society increasingly calculable, comparable, forecastable, perceivable, and thusly one of cooperation in a division of knowledge and labor.

But we must not, ever, think that politics is more than a vent for the resolution of conflict between groups. Our society is it’s institutions of calculation. Our fitful political rhetoric an amusement and distraction that rails against our lack of control over them, while at the same time our prosperity entirely dependent upon them.

And we must constantly monitor our schools of thought, as well as our own fantasies, so that we are not so enthralled in our pride, that we forget that we are inventing our future, not discovering it, and that each of these methods, schools of though, political systems, is a flashlight in the dark, and our institutions of calculation the power grid that keeps them lit.

Share this:

Like this:

A left-leaning blog-squatter on Economist’s View repeatedly makes requests for simplistic reasoning, thereby making his level of understanding, that by which all rhetoric should be judged: a measure which is obviously arbitrary.

All expressions are increasingly abstract evolutions of directly experiential concepts, and perceived simplicity in communication is a function of the commonality of experiences shared by the participants. (Hence the still misunderstood nature of evolution as undirected.)

Insight just is the opposite – the communication of unseen patterns – or insight would not be a scarcity and therefore of value, or notice. Quantitatively measured categories require presupposed invariance in the category definition (the variables), while the qualitative nature of human choice, the content of human memory from experience which determines the interpretation of ‘facts’, both serve to undermine such analysis. Our native method of calculation is to use effort, property (objects of utility) and time. Numbers simple help us fine tune our perception and measurement.

Next, history and it’s data are correlative assumptions without an underlying theory of causality described by human action. Historical correlation of events is simply an updated variation of the will-of-god. Facts are not facts unless they have a theory and correlation is not a theory. Mathematics is not causal, only narratives are causal. Narratives are only causal if they are expressed as a chain of human actions which are testable by the application of behavioral norms and comprehensible incentives. So correlative political statements attributing policy to resulting economic factors are not necessarily causal, especially given the time delay. Furthermore, external factors that are more influential than policy must be included or eliminated lest we attribute cause to symptom.

For example, the much repeated error on this board attributing 90’s success to Clintonian policies rather than the lack of those policies interfering in the speculative growth technology, and the fall of the soviet model, and the rise of the chinese model. Politicians have few short term levers. And they are largely punitive (tax and law) or positive (credit) but they have many long term levers Unfortunately our system encourages them to act for the short term, and so does the ideology of class warfare under the rubric of ‘equality’, given the material differences in human capacity for production in a post-agrarian world.

So if this is a forum for political advocacy of a position independent of such understandings, then that’s one thing, but as I understand it, it’s a forum for the discussion of economics, which, as a young and not well understood science, is of material consequence, since economic productivity has replaced religion and moral conformity as the means of compelling one group or another to the bidding of the others by the application of the violence of government through physical, tax, or credit (tax) means.

In other words, many people are make assumptions in order to support a confirmation bias, and rely upon a requested simplicity where none exists, and if it does exist, it does so by requiring that events, and causes, be perceptible to the individual, when the entire reason we have economies and institutions and habits and quantitative tools is to extend that perception, which is naturally limited to property and perceived utility.

Like this:

1) From the private sector: We don’t need stimulus we need credit. Banks simply wont lend. While the process of correcting bank balance sheets is underway, that same process must occur in small and medium sized business before any turnaround can occur. In my largest company’s case, our banks have been failing gradually, and we have been cost cutting, not because of decline in profitability, but because of decline in borrowing capacity, and an inability to find new banks willing to lend. About 20% of the work force was affected. In the other company I own, we are experiencing similar problems.

2) We need an area of growth that creates opportunity, and we need it in an area where we can CREATE DEMAND by innovating (taking risks by trial and error). Demand is not simply naturally derived from abstract confidence, it is created by investment, risk, promotion, advertising, and sales. People consume according to stimuli and status attainment. But they have to be aware of opportunities for stimuli and status attainment. And we must constantly develop new products to inspire them to work, risk, borrow and spend. The government is not stimulating anything that will help us CREATE demand. For example, building power plants, or a new power grid, which reduce costs and allow us to compete by discounted power cost rather than discounted labor cost. It is creating further expenditure requiring infrastructure. This is of course, a temporary fix, that is a long term drain on the economy. Instead, stimulate the creation of opportunities. Or at least, understand that there are a minimum of three classes 1) banking and finance, 2) entrepreneurs, engineers and scientists, and 3) clerks, laborers and craftspeople, and that stimulus generally helps the first and the last, but the middle is where the job creation comes from. And fundamentally, the entrepreneur cannot borrow today. Entrepreneurs, while often called capitalists are rarely possessed of a lot of capital. They are possessed of the ability to unite capital, knowledge and resources (including labor) in pursuit of opportunity for mutual gain.

3) Fixing the problem of an incalculable economy (loss of consumer confidence because of decrease in anticipated opportunities, and therefore disincentive to risk money and credit) is repaired most easily by having the government fund banks to buy back depreciation in home prices, and refinance those new homes, preserving the equity of the homeowner. THis would return to government (the treasury) the accountability for their actions in flooding the economy with unproductive credit, and the resulting distortionary prices.. This one policy enactment (which a number of us tried to promote in the spring of 08) would have the most efficient and quickest effect on changing consumer confidence because it can occur fast enough that the stickiness of wages and prices can correct. Countering uncertainty requires acting on debt reduction (home balance sheets) faster than the contracts (wages and prices) can be renegotiated in the private sector, which is a collection of promises and agreements and habits between individuals.

Of course, the old argument is this: everyone wants to use stimulus to build roads because they require unskilled labor, and therefore have an immediate effect on the least flexible people in the economy. But these roads have to be maintained perpetually, and high cost, and generally are not. When, planes on the other hand cause the opposite reaction.

Then the question becomes, not just one of redistribution, or debt, but urgency, and motivating all of the productive classes of finance, entrepreneurship and labor, to work together. Not focusing on just one or another, but all three. This is one of the other failures of the bias that comes from overemphasis of monetary policy: forgetting that we have to move all three classes of people in order to stimulate the economy.

Like this:

RE: “One way to look at the Bush years is that job growth was lousy so the Fed (and the government policies) subsidized construction jobs by creating a housing bubble. That jobs program abruptly ended. It is now time for a new jobs program. For the longer run, it is time for a different labor policy that will create many more jobs.”

It’s not just a way to look at it, it’s what happened. They wanted to create this ownership society as a means of countering the growth of urbanized socialism, and the diminishment of freedom, and competitive prosperity. This is the most important dimension of the multi-dimensional philosophy that they have been following. (We tend to classify them as having a simplistic philosophy but it is not so. It is not useful to underestimate the thought of your competitors.) The rest of it is essentially a universalist christian concept for the material benefit of mankind, (going back to Alexander) that promotes democracy as a means of exporting control over world resources in order to keep prices low, and maintain military and political power.

The problem is for their philosophy, that in the end, society has become urbanized, and large and dense. And the epistemology of urbanites is very different from the epistemology of farmers. There is more similarity between the evolutionary tendencies of urbanites and slavery economies, than the evolutionary tendencies of farmers, for precisely these epistemological reasons. THis difference has been understood for a long time, and written about extensively. However, our current status of behavioral economics has not reached a sufficient state of maturity to connect this set of tendencies, with density of population, and availability of opportunity cost at the expense of perceptibility of causality. Furthermore, our calculative institutions (accounting and taxation) as they are currently practiced, effectively launder causality from our information systems, and require us to rely on the farmer vs urbanite dichotomy as a religious or political difference, or ‘taste’, or even as a strategy of class warfare,versus relying upon factual information that allows us to analyze our behavior and make judgments about it.

Fortunately we know how to fix these issues, so that the epistemological clarity of farming (visibly of cause and effect) is available to the urbanite.

Unfortunately, we have a form of government that distracts us from solving this problem by individual profiteering on the resolution of conflicts between groups and classes.

Our biological sensitivity to fairness, which compels us to work hard, and endure costs, in order to punish those who steal from us, or treat us unfairly, seeks to commit violence, control, or punishment between groups in order to feel fairness has been satisfied.

However, this masks the underlying problem as one of solving the underlying problem as one of extending human senses, perception, and comparitive and calculative ability such that we can make decisions for collective benefit.

There is an argument that such accountability, which would come from epistemological clarity, would still be avoided by the peasantry, because of necessity we much manage consumption through the pricing system. However, redistribution can mollify discontent as it has in much of europe, assuming that there is anything to redistribute, because the population provides competitive value in contrast to other competing groups.

I have a more benign view, which is that if a sufficient number of people can understand that this is a problem of providing information, on the scale that was provided by double entry accounting, and the inventory process facilitating taxation, and the standardization of currency, a small number of simple policies can be enacted that will provide us with the information we need, and therefore will allow us to cooperate, profit, and redistribute without the necessity of relying upon democratic negotiation for the purposes of resolving disputes between classes.

Capitalism is with us forever as a set of institutions, precisely because humans cannot, in real time, process complexity of information without those institutions. Redistribution is likewise with us forever, since there is a difference between the necessity of incentive and the necessity of calculative power, and the preference for fairness. Likewise, social and economic classes are with us forever, because people requires status differences in order to pursue the mating ritual, and will create them faster than such differences will be redistributed, just as they will create black markets to circumvent anti-capitalist activity.

But capitalism and socialism as biases, are only necessary as biases, because we cannot calculate, measure, and compare, the complexity of society in which we live.

It may seem simplistic that society can be better managed by implementing changes in accounting, taxes, banking, credit, and the scope of lawmaking, but our society is changing BECAUSE of changes in these things. Instead, these institutions are what made our complex society possible, and our social systems, because they require decision and legislation rather than simply relying on evolution of business practices, simply evolves much more slowly. If we simply correct this problem, we can get away from class warfare, and into cooperating between classes for mutual gain.

In other words, we are trying to build a science of economics on testing assumptions because we lack data needed to actually understand causality. We will have a much easier time if we have the data, and we have the technology, in both accounting and record keeping, to maintain causality in our data.

Like this:

There was a great deal of research and discourse on technology in medicine when computing systems began to enter the operating room in the 1990’s. In particular, in the use of anesthesia. The most commonly discussed example was a difference in turning knobs, in which one machine turned right to increase and another turned left to increase, and in confusion the patient was killed. This and other events caused a systemic review of medical equipment and the development of standards. THe emphasis in the medical community however, was just as directed at training it’s staff as it was at the hardware. This has not been the case in IT, largely because costs of risk are more easily assumed, and costs of failure are perceived as more tolerable. However, this tolerance is due in large part to a lack of visibility by executive management, to the breadth and impact of those risks, partly because of a lack of understanding of business risk measure by IT management, and in many businesses a failure of IT and Accounting and Finance to share sufficient information for IT to do so.

The medical and engineering fields attempt to solve the problem of risk and recovery differently. They do so because of biases. Those biases evolved from the methodology and traditions of the culture of the profession. There is a tendency to think that IT has fully commoditized and therefore can be regulated as is plumbing and electricity, but IT is far closer to medicine in it’s complexity than are the more mechanical traditions. And this confusion, or error in philosophy is common within many different specializations or social groups. From technical specialties to the philosophical biases of entire civilizations.

The medical field, especially in surgery and hospital care, includes infinite risk (people die, and there is a high liability cost) and consists of actions are taken by people using tools. This set of properties has made their industry focus on the human element: on improving people, and in particular, on the assumption of failure, therefore improving people.

In medical devices, there is an extraordinary emphasis (due to research papers) on producing tools with very consistent user interfaces that are extremely simple and consistent (such as dials turning the same direction producing similar results) and an emphasis on protocol (scripts that are followed), and lastly on training people to use these tools in order to reduce failure.

But every process is seen as a human problem of discipline and training. Not of engineering at lower cost, or productivity — but as risk reduction. Production costs are far lower than the costs of failure.

This is true for the military as well, where vast numbers of people must work in extraordinarily deadly conditions, under extreme duress and exhaustion, using complex and dangerous tools. Soldiers are taught very simple behaviors, one of which is to speak entirely in facts, rather than interpretations – one of the primary purposes of western basic training. To teach soldiers to separate opinion from recitation of observation.

Similarly, when it was found that different hierarchical social structures around the world prohibited airline crews from communicating effectively and was causing deadly crashes, these crews were taught english and declarative mannerisms by training specifically to overcome these cultural biases and lack of clarity in communication –which is why english is the language of transportation. English contains a spoken protocol of clarity which english speakers do not understand, just assume, and that clarity originated in the western military tradition of enfranchising all citizens in a militia.

Epistemology. This is a word meaning, in practice, ‘the study of how we know what we know’. Every field has an assumed epistemology. Teaching, Soldiers, Politicians, Engineers, Plumbers, and even psychologists, have a means of understanding causality, and a means of testing themselves. Because each field is limited and includes different kinds of risk and failure, people use different testing criteria for planning and choosing their actions.

Teachers for example over rely on written tests rather than question and answer, and therefore test most often for short term memory rather than understanding. This has consequences for all societies, but largely for our political system which relied on rhetorical ability.

Protestant churches in the colonial period were effectively debating forums for local social solutions — something that is required of a democratic system.

Furthermore, another consequence of teaching methods, that attempts to reduce costs, is that of literally destroying boys minds (physical damage to the brain development) by making them sit for hours a day. (Or by the use of drugs to cause similar brain damage.) This destroys society in doing so, because while girls learn to cooperate through compromise, men learn to cooperate through displays of competition and experimentation with dominance, and if prevented from doing so they will not develop a interest in the real world, fail to take responsibility and have little interest in society. All because of the epistemology of teachers, in an effort to perform ‘efficiently’. (And as fathers they will play world of Warcraft, not because they want to but because during their development they were forcibly harmed by these teachers.)

Doctors do not make these kinds of errors. Because the cause and effect of their actions are visible. The cause and effect of political policy, in particular, monetary policy, is likewise opaque, and politicians seek to keep it so.

Fire regulations are fascinating, and building codes in particular, because of how few office building fires we have. The cost of construction is heavily influenced by these codes, and has dramatically risen, and both regulations and costs continue to expand despite the fact that they appear no longer to reduce risk. Conversely, firemen still drill and practice on a regular basis which is good, but we still allow tall buildings to be constructed despite the fact that it is dangerous to put many people in a building of more than six stories, that it creates congestion, and in general, research is conclusive, that people don’t like working in them, and that they are unhealthy environments, and heat dissipators and energy consumers.

Effective military organizations run drills. Lots of them. The US in particular runs them constantly. Some NATO countries (Hungary) by contrast only allow their soldiers to shoot one to three bullets in all their basic training in order to reduce costs. But in practice, these organizations are symbolic in nature and are incapable of fighting. Partly because fighting in adverse conditions is largely dependent upon the relationships between soldiers built through shared experiences.

People are not that smart IN time, but fairly smart OVER time. We can solve problems given time. The only way to reduce the time, which is equivalent to cost, of recovery from failure is to pre-compute, or pre-train people to recover from failure, and in particular in the process of discovering how to recover from failure.

If IT management applied the same discipline, they would, once a quarter, create a scenario where three or more elements of their systems failed within a short period, and the staff had to recover from it. This is the approach most military tacticians take to educating their people.

There is too often an emphasis on the efficient achievement of goals, rather than on giving people goals and inserting ‘lessons’, or hurdles and obstacles for them to overcome.

In IT engineering, risk is rarely stated, because it is rarely visible, despite the catastrophic cost to business. Errors are considered to be functions of the machinery, rather than of the people using and maintaining it. People are considered a cost to be minimized so that more work can be put through them.

If a system cannot be assembled and disassembled and tested at every point in the process, then the people cannot understand how to recover it under duress. This mastery by intentional reconstruction is how Formula One racing teams think of the process of engineering. They constantly drill, because of the value of time in racing.

IT is this value of time, and its lost productivity cost, that is hidden by IT. furthermore, IT does not report on the problems it solved and the cost of those problems sufficiently to keep management informed and educated on risks.

THe converse happens as well, which is that IT is a resistance to change, because the impact of that change is something they don’t understand, because they have spend too little time in drills.

Some companies are constantly fighting this battle. Citicorp for example, was a cluster of different banks under one management system and brand name, but not under one infrastructure (I hope I have the bank right here, I am pulling from memory). This meant that in the financial crisis, it was less able to react, because they kept costs down by keeping risk high, by not developing a common infrastructure, both technologically and organizationally.

Doctors have extraordinary peer reviews post success and post failure. They spread knowledge by discourse and question and answer. (Part of this is the skill of medical students in analytical thinking and rhetoric versus that of the IT population.) However, the concept of improving people thorough discourse is consistent in their approach.

Each patient is a new experiment, having the potential for failure or success and the consequential new learning that comes from either.

Retail shops use secret shoppers to test for shoplifting and customer service. The military uses maneuvers, and even uses it’s own members to test it’s own security. IT rarely conducts planned failures. To see how the staff reacts and to educated them. IT does perform upgrades. And for this reason, upgrades and system maintenance are one of the most important means of keeping the staff trained, because they fulfill as similar function to drills and teach the value of redundancy.

These assumptions, this epistemology, is different for every little field of specialization. But what happens in each field is that they in turn confuse the methods, practices, tools, means of testing, and general operating philosophy then become assumptions about the nature of the real world, and assumptions about human nature, and even human capability, and in particular human plasticity and adaptability, as well as human learning and understanding. WHen in fact, we must first understand the human animal as the maker and maintainer of complex systems, and that the human animal has very specific properties, none of which are terribly impressive without extraordinary role playing, testing and training in real world (versus written or spoken) conditions, where, they must cooperate toward complex ends, in real time, under conditions of duress.

For example, human civilizations are different largely because social orders were initially established by their warriors and their battle tactics. It may seem odd that the east, west, steppe, desert, and mystical civilizations all are caused (Armstrong, Keegan) . It is uncommon that even westerners understand that western battle tactics in europe were heavily based on maneuver (chariots) the required cooperation. Cooperation required political enfranchisement, political enfranchisement led to equality, equality led to debate, debate led to logic, logic led to science and rationalism. This is different from both the tribal raiders, the mystical zoroastrian as well as the chinese familial and hierarchical traditions. An interesting problem for intellectual historians has been why Confucius could not solve the problem of politics and directed the civilization to familial structures instead. Or that the primary difference between east and west is the assumption that our job is to leave the world better than we entered it, that the purpose of man is to transform the word for his utility, that man is the ultimate work of nature, versus the eastern view that our job is to work in harmony with the world, (non-disruption), that humans are somewhat vile by nature, that man is necessarily in class structures, and that truth is less important than the avoidance of conflict (except when it involves barbarians). These differences led to our different concepts of life itself.

In IT there is a cultural assumption that the engineers job is to prevent failure, or, to work with the systems without causing additional complexity that increases the probability of failure, or to repair from failure. However, few organizations are structured such that there are drills, and processes by which to recover from failure for the entire purpose of educating the human element in the system.

This cultural legacy is largely due to the perceived (although not factual) high cost of IT implementations, largely as a remnant of the fact that during IT’s development, a great deal of research and development, in pursuit of competitive advantage, was conducted in-house, with the resulting failure of research and development programs. In fact, IT infrastructure costs were significantly lower than many previous innovative technologies adapted by business. (In particular, electricity as a replacement for steam or water power.) And by comparison, the calculative burden an uncompetitiveness placed upon companies by antiquated accountancy methods, or government taxation programs, or building codes, are often higher than IT costs. In Europe for example (as well as in California) businesses for small networks, rather than more efficiently combine into larger organizations with lower administrative costs, just to avoid these external expenses.

So, this is not only an IT problem, but an executive management problem: the CEO cannot authorize budget for risk mitigation, (nor cover himself by doing so) if the IT management does not understand and quantify the risk, or it’s probability.

( If Executive management does not promote better methods once presented with the information, then the popular revolt is the only real solution (go work somewhere more worthy of your talents that doesn’t reduce it’s cost of doing business by counting on the fact that you’ll live under greater unnecessary stress, and possibly lose sleep and health, or even risk your job, because you were not allowed to engage in preventative activities. Conversely, if you dont provide them with that knowledge, in form and quality at least equal to those provided by sales and accounting organizations then they are not to blame for your inability to do so. They have an epistemology too: which is that they are told many things by many people, and must be able to test these bits of gossip and opinion somehow and only numbers can provide that ability.)

IT management has long been criticized for wanting a seat at the table, but not warranting a seat at that table. (Nick Carr) But in general, these people may understand the craft, but often fail to understand the metrics and management of capital in a business, In other words, executives are included for their ability to postulate theories and deliver results. Customer service internally and externally, Risk (Failure Management), Productivity Contribution by the improvement of competitiveness, and Cost OF SErvices, are all criteria by which IT organizations should be measured. From the “ultimate question” for customer service, to cost of service, all of these are measurable. But you cannot judge that service if the management does not adequately measure it, and report on it, so that the executive management of the organization is capable of understanding and making decisions that support IT’s mission.

Think of how much information the Accounting (history) and Finance (future) organization gives to the CEO. THink about how much the Sales organization gives to the CEO. THink of how LITTLE marketing organizations tend to give by comparison, and think of how much less than marketing, the IT organization gives.

The respect and influence that a function of the company has over the distribution of resources in the company has largely to do with the metrics that it provides the management team. And how much exposure to risk the IT organization inserts into the business by failing to see the management of complex systems as one of engineering rather than one of human development and the testing of humans for failure, and the measurement of humans in their ability to recover from failure.

Just as public intellectuals try to change public opinion to influence policy, by the use of narrative and argument, as well as data and it’s interpretation, because they need to help people think differently who have previous intellectual assumptions and biases dependent upon the methods and tools that they use in daily life and then apply outside of that domain of experience, IT management, and to some degree, the staff, must look at the underlying assumptions both in IT and in general business management and develop the discipline internally to experiment with failure, in order to teach the human component of complex systems, how to react in short time periods, while at the same time, using metrics and measures to inform the policy makers in executive management, so that they can intelligently and rationally make decisions about the allocation of resources for the purpose of creating profit (a measure of our use of the world’s resources), and the reduction of risk, so that all members of the organization, who are choosing to invest in this stream of income and friendships and knowledge at this organization, instead of an alternative stream of income, friendships and knowledge at another organization, can reduce the risk and cost to themselves in the event of failure of those estimates of risk.

Share this:

Like this:

Paul Krugman wrote today, poking fun at prestidigitators in the financial sector. As the most public advocate of forcible redistribution, I thought it was appropriate to poke back.

The understanding that we obtain from reading the predictions of the financial sector, is limited to what these people are thinking, and how they will act because of it.

The understanding that we obtain from reading the predictions of public intellectuals, is limited to what these people are thinking, and how they will act because of it.

The understanding that we obtain from listening to business leaders who risk their capital, is limited to what these people are thinking, and how they will act because of it.

The understanding that we obtain from listening to the predictions of common people, is limited to what these people are thinking, and how they will act because of it.

The understanding we obtain from the opinions of all of these groups of people,is the understanding of how these same people react to what they hear, and what actions that they will pursue accordingly.

There is no future determined in advance, only the future that people make because of the information at their disposal, that they can employ to project that future, and the resulting actions that they take in daily life in comparing their needs, obligations, resources, prices, and their anticipation of coordinating the optimum among them.

But when we distort the financial system through credit money, or distort entrepreneurial activity through taxation, or distort public opinion through consensus building in order to gain political control over the levers of power, we distort the evidence that these people use to cooperate in their daily lives, and to build a stable, prosperous economy, especially when a prosperous economy is entirely driven by the willingness of it’s members to take risks in anticipation of reward for doing so.

While it seems that our transition from the theocratic and religious public debate about the will of god to that of the Civic Republican moral debate about the pragmatism of laws and human character, to that of the economic debate about the material benefit of citizens, has been toward practical rationality, and material reward, it also appears, that under all three public debates, only the preservation and development of our institutions of truth, contract, property rights, accounting and division of labor, has had any material impact on our quality of life – and that the ongoing pubic debate, the use of taxation, and the use of monetary policy has done more to distort the information systems people use to build these institutions, and habits, and trade, and division of labor, than has the debate and political policy over these previous religious and moral traditions — because we are not debating the subject at hand, but debating who should obtain power to manipulate the levers of tax, law, and money.

We are, in this public forum, debating power over spoils, not the productivity and prosperity that results from cooperation and trade under our institutions.

Most of our technologies evolve by accident of compounding fractal patterns that increase our ability to cooperate in larger numbers:
1) Restraining the use of violence creates the institution of property.
2) The institution of objective truth and fidelity of contract creates complex trade.
3) The institution of money creates the technology of human calculability and cross-categorical comparison.
4) The volume of trade creates the establishment of prices subject to sufficient stickiness that they become forecastable.
5) Sticky Prices create the ability to lay expectations, and forecast complex uses of property.
6) Credit creates intergenerational cooperation, and the pairing of older wisdom with younger effort.
7) Fiat Money and Credit Money create insurance allowing more risk mitigation at the cost of socializing losses and privatizing wins.

Conversely:

1) General liquidity distorts the pricing system. And people are informed by those prices to pursue unproductive, but price-ballooning ends.

2) Taxes distort entrepreneurial activity, and in particular, distort the accounting process, and distort banking, credit, investment, and employment, to the detriment of each, while entrepreneurial skill, the most valuable asset of any economy, is directed to tax reduction, rather than productivity gains.

Since calculability is the means by which we cooperate:

The state should collect and redistribute interest, not issue taxes. A state based upon interest collected is the only method of political and social calculability currently available to man. The state’s job is as a lender, who redistributes profits to citizens.

Taxes should be accelerating and flat, on those people who collect and coordinate interest, when their balance sheets make them financially independent, and therefore living upon credit and interest, not upon entrepreneurs who take personal risk, and who are penalized by taxation for having done so.

The citizenry should not be enslaved for decades by the use of intergenerational theft and enslavement by involuntary debt.

Class warfare should not be fomented, between classes but cooperation and respect encouraged by a process that rewards politicians not to gain from spoils, but to gain from borrowing from the average person, and returning to him his investments. Under this method a politician can be held accountable but material and calculable methods of measurement.

The state should not be able to enslave it’s citizens through taxation and justify it by moral argument, any more than it should justify it by the will of god, or justify it by ti’s capacity for violence. These are all forms of slavery. Taxation is a product of slave society. If we are indeed rational beings capable of democracy, or capable of independent commercial action, then we have exited slave society. Ownership by an individual or ownership by the state are insignificant differences.

The polibical debate should not be over who controls the levers, but that the only lever should it should use is lending, and the only purpose of the state is to borrow risk from the population and use it to increase production, and thereby distribute teh spoils justly earned by all parties.

In this manner we change the public debate from that of class warfare and the power to conduct class warfare, and distributing the spoils, to the civic republican tradition of generating prosperity.

Law and taxes are products of slave societies.
“Credit and Interest are the ties that binds us. Law and taxes are the thefts that divide us.”

Change the public debate. We have been debating the wrong problem for a century. We should be debating how to make a society free from theft and coercion between classes, and to one of cooperation between them through mutual self interest.

This is “Capitalism v3.” But it remains to be seen how long before it takes hold – or fails to.

Like this:

RE: “One way to look at the Bush years is that job growth was lousy so the Fed (and the government policies) subsidized construction jobs by creating a housing bubble. That jobs program abruptly ended. It is now time for a new jobs program. For the longer run, it is time for a different labor policy that will create many more jobs.”

It’s not just a way to look at it, it’s what happened. THey wanted to create this ownership society as a means of countering the growth of urbanized socialism, and the diminishment of freedom, and competitive prosperity. This is the most important dimension of the multi-dimensional philosophy that they have been following. (We tend to classify them as having a simplistic philosophy but it is not so. It is not useful to underestimate the thought of your competitors.) The rest of it is essentially a universalist christian concept for the material benefit of mankind, (going back to Alexander) that promotes democracy as a means of exporting control over world resources in order to keep prices low, and maintain military and political power.

The problem is for their philosophy, that in the end, society has become urbanized, and large and dense. And the epistemology of urbanites is very different from the epistemology of farmers. There is more similarity between the evolutionary tendencies of urbanites and slavery economies, than the evolutionary tendencies of farmers, for precisely these epistemological reasons. THis difference has been understood for a long time, and written about extensively. However, our current status of behavioral economics has not reached a sufficient state of maturity to connect this set of tendencies, with density of population, and availability of opportunity cost at the expense of perceptibility of causality. Furthermore, our calculative institutions (accounting and taxation) as they are currently practiced, effectively launder causality from our information systems, and require us to rely on the farmer vs urbanite dichotomy as a religious or political difference, or ‘taste’, or even as a strategy of class warfare,versus relying upon factual information that allows us to analyze our behavior and make judgments about it.

Fortunately we know how to fix these issues, so that the epistemological clarity of farming (visibly of cause and effect) is available to the urbanite.

Unfortunately, we have a form of government that distracts us from solving this problem by individual profiteering on the resolution of conflicts between groups and classes.

Our biological sensitivity to fairness, which compels us to work hard, and endure costs, in order to punish those who steal from us, or treat us unfairly, seeks to commit violence, control, or punishment between groups in order to feel fairness has been satisfied.

However, this masks the underlying problem as one of solving the underlying problem as one of extending human senses, perception, and comparitive and calculative ability such that we can make decisions for collective benefit.

There is an argument that such accountability, which would come from epistemological clarity, would still be avoided by the peasantry, because of necessity we much manage consumption through the pricing system. However, redistribution can mollify discontent as it has in much of europe, assuming that there is anything to redistribute, because the population provides competitive value in contrast to other competing groups.

I have a more benign view, which is that if a sufficient number of people can understand that this is a problem of providing information, on the scale that was provided by double entry accounting, and the inventory process facilitating taxation, and the standardization of currency, a small number of simple policies can be enacted that will provide us with the information we need, and therefore will allow us to cooperate, profit, and redistribute without the necessity of relying upon democratic negotiation for the purposes of resolving disputes between classes.

Capitalism is with us forever as a set of institutions, precisely because humans cannot, in real time, process complexity of information without those institutions. Redistribution is likewise with us forever, since there is a difference between the necessity of incentive and the necessity of calculative power, and the preference for fairness. Likewise, social and economic classes are with us forever, because people requires status differences in order to pursue the mating ritual, and will create them faster than such differences will be redistributed, just as they will create black markets to circumvent anti-capitalist activity.

But capitalism and socialism as biases, are only necessary as biases, because we cannot calculate, measure, and compare, the complexity of society in which we live.

It may seem simplistic that society can be better managed by implementing changes in accounting, taxes, banking, credit, and the scope of lawmaking, but our society is changing BECAUSE of changes in these things. Instead, these institutions are what made our complex society possible, and our social systems, because they require decision and legislation rather than simply relying on evolution of business practices, simply evolves much more slowly. If we simply correct this problem, we can get away from class warfare, and into cooperating between classes for mutual gain.

In other words, we are trying to build a science of economics on testing assumptions because we lack data needed to actually understand causality. We will have a much easier time if we have the data, and we have the technology, in both accounting and record keeping, to maintain causality in our data.

Share this:

Like this:

I’m going to say something. It will only take a moment. And my time is at least as valuable if not more so than the state’s, the court’s, or that of the officers’.

You see, I understand something very important.

I understand that the state’s only power is violence. That power comes from its claim to a geographic monopoly on violence. That is what a state is. A group of men who lay claim to a monopoly on violence. All actions which compel a person to do other than he wishes in the use of his property, his body and his time in the peaceful and honest exchange of goods, services, information and affection, are acts of violence. Consequently, there is no action that a state needs to take, and therefore no action a state can possibly to take, by the application of law, that is not an act of violence no matter the form or ceremony the state drapes over such actions. A state is the administration of organized violence. A court and its servants dispense violence.

The state exists, and possesses that monopoly on violence, because men like me, grant their capacity for violence to the state, so that it may dispense it as needed from a judicial bench. By granting our violence to the state we remove from ourselves the daily administrative responsibility of parenting society, defending life and property, and resolving conflicts over property, so that we may devote ourselves to the pursuit of specialization in our division of knowledge and labor, and thereby develop our skills so that we can achieve our ambitions, and amuse ourselves, in whatever way we see fit, while decreasing the cost for others to do the same. By the act of granting our violence to the state, we assume that our violence is justly dispensed on our behalf. That is the term of our agreement with the state. It is what makes a man a citizen by choice rather than a subject or slave.

We are all capable of violence. It can never be taken from us as long as we live. We carry it with us as a constant potential. It grows, it matures, and it dissipates with age. It is not a right, or a privilege, because rights and privileges are things we give to each other. Violence is not given, it simply exists in all men at all times. Some of us are wealthier in violence than others. Some men are capable of very little violence, some men are capable of physical violence, some men capable of organized rabblery and protest, and some of us, men like me, capable of revolution and civil war. As such, we do not contribute our violence to the state in equal measure.

The state’s power to organize society by way of its laws, institutions and processes is an illusion constructed by the accumulation of habits in the citizenry; habits which are perpetuated by the daily use of those habits, and where those habits are reinforced by small and instructional displays of violence by the state, so that it may maintain the illusion of a monopoly on violence, and therefore encourage among the citizens, the retention of those habits. The potential for violence within the citizenry vastly outweighs the limited violence that can be distributed by the state. It is a credit to our habits that so little violence need be distributed at any one time that the illusion of the state monopoly can be preserved so cheaply, by so few people, and using so little violence. The actors in the state, in whatever capacity, who make use of my violence on our behalf, are few and comparatively weak. And the state can only dispense my violence, on my behalf, from a judicial bench, because of the illusion of strength that comes from the presence of those habits, and its promise of enforcement by the grant of violence from citizens.

As long as any agent of the state justly parents individuals to reach their greatest potential, as long as any agent of the state justly resolves differences in property, as long as any agent of the state protects life and property — any agents of the state have my consent to maintain that illusion of strength, and to dispense my violence on my behalf to maintain those habits, and that illusion, so that all men may continue to participate in productive exchange, or in humble amusement in the activity of their daily affairs.

But if for one moment, you seek to treat me unjustly, and you begin to believe your own illusion, and you forget that you are dispensing my violence on my behalf, and you seek to treat me not as a citizen who bestows upon you my violence, to be justly administered, but a subject who must obey rules, and if you believe and act as though the law exists not as a convenient tool for the resolution of differences between peers, but a scripture that I must obey as a subject, then it is not only my right, but my duty to myself and others, to take from you my given violence, and to remind you if I can, and teach you if I must, that the source of that violence is in its citizens; so that the state understands those habits, their cause, and purpose.

If I must remind the state, I hope it is by this simple, gentle oratory. If that will not suffice, I will not resort to the display of petty personal violence, nor to the disorder of rabblery and protest. Because that is not the capacity of violence that I gave to the state. I will instead raise an army and show you what violence it is that I do restrain, so that you are once again reminded that you are an actor on my behalf, and that of my fellow citizens, and nothing more. And if you doubt for a moment that I can do such a thing, I will be only so happy to prove it to you, by starting in this very room, on this very day, if necessary.

This duty is what it means to be a citizen. To grant your violence to the state so that it may be justly administered. And to dismantle that state should it unjustly use your given violence.

Foolish men find comfort in the sameness of life, without understanding that such constancy, and the illusion of control we have over our daily affairs, can be rapidly changed by one small spark, one man’s choice, one seemingly random act. Foolish men believe habits and rules are truths rather than conveniences, that their power is divine or systemic, and that their methods and rules are wise and scientific, rather than the accidental, pragmatic and convenient efforts of simple men fitfully crafting an edifice in anticipation of the turbulent events of an unknown future. These rules and ideas are nothing more than the limited judgements, habits and fantasies of such men, however well their intentions.

And if at any point such foolish men lose sight of the fact that these convenient methods and tools are less important than, and subservient to, the men whose lives are affected by the use of my violence on my behalf, or if such foolish men forget that rules have no wisdom of their own, without the wisdom to interpret them, and that the use of them must result in the betterment of each man, then, they have forgotten the purpose of those rules. That purpose is the perfection of each individual man, and in that perfection, to parent each generation that follows so that it may reach it’s greatest potential. The perfection of man is our only just purpose, not the perfection of our methods and tools, or the ease and efficiency by which we administer them. The man is important, not the rules.

And I will not allow my violence to be misused against any man. And in particular I will not allow the abuse of my fellow citizens or of myself for no other than methodological or procedural reasons, so that another man, an agent of the state, whose only power comes from my given violence, may be absolved of the difficulty and effort expended in justly administering the violence I so entrusted to him. I will not permit men to suffer for another man’s laziness, when it is my violence at the expense of my fellow men, that he wields in order to obtain such leisure.

And when a citizen is abused by the criminalization of administrative rules, of petty regulatory processes and efficiencies, or of manners and disrespect of the court so that it can maintain its illusion and habituation, or when he is abused by prosecutors who are the worst ideological acolytes and to whose advantage these rules are biased, or when he is abused by the state’s staff, composed of common people endowed by procedure with powers incommensurate with their abilities, and the ability to abdicate responsibility for treating citizens with manners and good service, the state engages in the most heinous form of laziness, and the most intolerable misuse of our violence on our behalf.

Revolutions are not made from single heinous crimes, but from the compounded layering of administrative abuses of citizens. It is not only citizens that must develop habits, but the state, for it is the state who must use greater manners when dispensing our violence, whether that violence is dispensed from the court, the prosecution, the staff, the police, and especially when doing so inspires the understandable and desirable disgust and displeasure of those men unjustly victimized because of the state’s laziness and irresponsibility with our violence.

If the state’s ambition is restitution of property, or the collection of collection for contract violations, even social contract violations, or procedural errors, for which such fines are simply a form of restitution, then this is its duty, so granted by us. But if it is punishment rather than restitution that the state seeks to render, then I do not, and no citizen should, permit any man to punish me, and will return that punishment in kind. Restitution is the means by which we correct errors, selfish weakness, and human frailties among peers and is the only reason we give our violence to the state to administer on our behalf. Punishment is the submission of slaves to an authority. If you seek to punish me, or my fellow citizens, rather than to give restitution, you seek to enslave us. And I will not suffer your enslavement, nor tolerate the enslavement of my fellow citizens.

Foolish men have come to believe that rule of law, is likened to the laws of physics: that they are tools that override our wisdom and senses, and which if followed produce scientific results. But this is an error. Laws are principles for wise men to refer to, no different from myths, traditions, and stories, to make use of in resolving conflicts among men, providing restitution in the case of loss, so that we may exchange property instead of violence, cooperate peacefully in doing so, and develop specialization so that we may increase productivity in safety, decrease the cost of goods and services to each other because of specialization and competition, and therefore improve the quality of our lives, at lowest cost and risk.

I say this because I love life. I love mankind. I love my fellow citizens. I love each one of them. Fit or not, wise or not, young or old, wealthy or poor, healthy or ill. And I would gladly give my life in their defense, rather than allow someone, in his foolhardy and misguided illusion, to use my violence against them unjustly. And it is that statement, its passion, and conviction, and its promise of consequence, that makes me a citizen and no other.

So, I ask you to understand this appeal: I do not fear you. And you need not fear me if you are just, and care for my people.

But if you are unjust, and do not understand what I have said, then fear me. If you do not fear me then I must make you fear me. I must teach you the accountancy of the state, and its currency of violence. So that you never forget the origin of the violence you wield on our behalf, and in doing so abuse or enslave me or my fellow citizens.

The state must fear its citizens. It is the duty of citizens to maintain that fear. That fear is fear of violence. I am a citizen by the granting of my violence. The violence that we give to the state, the violence that we possess as men, and is only granted to the state under the condition that it be administered justly, on our behalf, to parent the society, to protect life and property, to resolve conflicts over property, and to administer restitution for conflicts over property. For those reasons and no other.

Share this:

Like this:

We have free speech, logic and rhetoric so that we may make arguments, not a polysyllabic variant of ten year old girls trading insults.

I realize that you may resort to these tactics because you are incapable of seeking a truth via argument. I also realize that you post sufficiently in this forum with a small number of other apologists, that you feel justified in your alternate reality, and lack of intellectual rigor. But that does not mean that you are contributing to the dialog, or conducting an argument.

Altruism is incalculable (as in unknowable), and does not allow multiple people to cooperate QUANTITATIVELY toward any end requiring risk and action, nor in measuring and understanding outcomes, and it’s result does not produce status differentiation, which is a necessary component of the mating ritual. You are applying the method of the family wherein altruistic actions are perceptible and create an economy of altruistic exchange, rather than the economy wherein such exchanges are imperceptible, and therefore, absent a currency that allows measurement.

Calculable ends are not just a matter of preference but of necessity. Status attainment is not just a matter of preference but of necessity. Incentives are not just a matter of preference but of necessity. And the management of the worlds resources in time and space is not a matter of preference but of necessity, since the velocity of that set of exchanges and application in the fulfillment of human needs and wants is just as important as the volume of them.

In effect you are simply immature, and are applying the epistemological processes of the family to the extended order of human beings, when numerically, you cannot KNOW about large numbers of people what you can KNOW about a family.

Marx was effectively a luddite. And you are as well. We are only similar to one another as farmers and tribal hunter gatherers. But in a vast division of knowledge and labor spread across billions we are increasingly unequal in ability, when ability is judged as the increase in production that decreases prices, and the voluntary coordination of people so that they can act to reduce prices. We can redistribute some of these rewards, as long as the process of doing so is CALCULABLE enough so that status, incentive, and individual calculability are maintained. But we cannot be ‘fair’ as you mean it, because that kind of fairness is not possible to know, comprehend, or calculate. Most often class warriors like yourself simply seek to create a status among their peers by political means that cannot be established by material means.

Implicit in your postings (all of them) is a ‘freedom’ that you take for granted, yet do not understand. That is that we grant men free speech, in substitution for withholding our violence, so that we may seek the truth, not simply seek to achieve our ends – violence is a much easier tool for achieving ends. And since a state can only dispense violence — it is its only tool — that violence, and the state, are a continuation of that exchange of violence for seeking truth, not seeking ‘to win’. Therefore if you do not debate rationally, men need not withhold their violence against you. And if they do, they simply allow you to steal from the social order.

In other words, if you are not seeking truth and are name calling, then you are both stealing from the public wishing well by which we all pay for the act of free speech so that we may seek truth — not so that we may get what we want. And if it is just to get what we want, then not only can the weak revolt, and return to violence, but so can the strong. Some of us are possessed of petty interpersonal violence, some of us capable of protest and rabblery, some of us capable of slaughter and civil war. That the weak threaten violence is a humor, since the strong are more capable both of its execution, and of paying a minority handsomely to oppress or kill the discontents.

You may be one of those people for whom degradation of our ‘group’s’ competitive ability and therefore status and prosperity is acceptable. And if that is the case, then again, you steal from those who seek to perpetuate our advantage and prosperity, by failure to participate in argument.

You may be one of those people for whom this is a mask for envy and laziness and simply wants others to take care of you rather than earn for yourself and others.

You may be one of those people who is willing to consume cultural capital for current ends, and who is willing to steal from the sacrifices that were made by those generations that came before us.

You may be one of those people that thinks, despite the vast ocean of data, that people are infinitely plastic in their behavior, rather than that humans behave in very clear and established manners across all states, nations, civilizations and times, and therefore are a utopian.

I don’t know which of these errors you’re making. But I do know that your failure to engage in an argument, is to hide behind an electronic connection as a means of stealing from your fellow man.

This may be too subtle for you, but I am casting you as a thief, fool and liar who works against the public good, in order to obtain what you want by deceptive means, rather than what can be obtained by honest voluntary exchange, using the only tools and institutions of cooperation that man has so far invented – those that are calculable, and the institutions that make them so. You are part of the reason democratic capitalism has failed, and why totalitarian capitalism has emerged as the dominant economic force to be employed in the world.

Like this:

Economists View members are notoriously leftist, and rely on name calling and weak arguments with political bias on a regular basis. There are a number of squatting regulars and they outnumber who seem to avoid commenting on the blog. Every once in a while I feel a compelling need to intervene on what must be moral grounds.

In this posting, which started with an argument by Gorbachev against the western model of fairness, I try to point out a few little problems with someone’s platitudes. The first author states an idealized version of production increases in a division of labor, and the consequential stratification of society that remains constant, over the desires and objections of those people more interested in the application of familial ‘fairness’ than the more material necessity of difference that comes from our real differences in value to each other. The second author complains. The third author resorted to name calling, so removed his comment.

Should you encounter similar problems, my response to these two is the argument you can use.

Reality Bites said…
[As we] … develop technology, it becomes ever easier to produce material things, and yes, there is decreasing labor needed to supply humanity with the basic material good necessary for survival. However there is an unquenchable demand for other goods that cannot be produced by machinery (yet) and so can employ all the people who lose their jobs to a machine. Entertainment as in movies and TV stories along with music and books will always be in demand and no machine can formula a good plot. Machines also need instructions so that they can operate and take over work formerly done by humans. Programmers will always be needed as we need to “teach” machines what to do. Maintenance is health care for machines, unless we can come up with a network of machines that can take care of each other, humans will have to do this work.

In the end, I think the cost to produce anything tangible will fall to nearly zero. Ideally, something like the Star Trek energy to matter converter will materialize whatever we want. It may never get that easy or efficient, but producing THINGS will get cheaper for sure. So what’s left? Ideas and intangible goods. New designs, new fashion, status will always be important and since it’s zero sum, there always will be the need to show or convey status. Humanity will be devoted completely to the intangible, the creator of a popular cup design (or design of any object) will be paid well as his design will be in high demand.

What worries me is what about the people who are incapable of creating good intangible goods? People who can’t create a good story, compose good music, or put together an unique design, what about them? I think there always will be room for them because of social status. They could sell their status, or sell their ability to give someone else status. Like being part of an entourage, or even offering human services like a butler. There will be machines that can fulfill that task, but having a human do it instead could convey status and thus human services will still be demanded and those incapable of inventing or creating can still work and make a living. Unfortunately, there will probably much less opportunity for such people and virtually none to move ahead. Creative people will be honored and gain “wealth” in terms of social status. Since we’ll all have everything material that we’ll need or want, wealth will have to take a different form, again probably social status since that’s zero sum. Uncreative folks simply will not be able to get wealthy because they will not be able to supply what society values the most, which will be based on creativity and new ideas. My vision of the future as I think it will be.

ozajh said:
I can think of two problems with this vision, and there may be more.

1. “Uncreative folks” can join or form armed forces, at whatever level of formality required. At some point losers will accept a lose-lose scenario if it means some level of hurt to the winners.
2. There is currently zero correlation between status/power and true creativity, and the folks at the top will labour mightily to stay there.

CurtD59 Said:

Define “top”. Financial, entrepreneurial, technical, medical, artistic, or political? Are you saying that in the meritocratic fields the best do not reach the top? Or are you saying that you want to redefine best as something other than meritocratic as defined by the field of practice?

If you mean political, do you mean that politicians are not creative? And if so this means that you do not understand their product or service. It is the service that we demand from them. Politicians are in the business of selling the service of resolving conflicts between groups of different interests, when those different interests have differences in belief, status, class, and ambition, and each of whom wishes to use the violence of government, which is it’s only means of action, to serve one group or another. Compromises are not universally available.

Define “true creativity”. What you mean, I think, is to apply change to achieve your desired end, not that people, in a vast cacophony of differences, each try to improve their status and status of their group when those groups have different interests and priorities. Secondly, there is voluntary creativity, such as entrepreneurship and trade, and involuntary creativity, which is to use the state’s violence to forcibly interfere in that creative process to put to alternate ends. As well as cooperative creativity, which provides incentives to apply one’s efforts and investments to alternate ends.

You imply a threat of revolution. In all revolutions, wether violent, economic, or democratic, one power class simply replaces the next, establishes itself as a new power class that attempts to preserve it’s privilege and power. How can this be changed?

Of course, you also suggest that the proletariat will rise up against this lose lose scenario, but there are two problems with this fantasy: First, that middle class revolutions tend to increase general prosperity, but proletariate revolutions tend to produce total destruction of the economy, or over time, drive everyone into greater poverty. The second is that those with ‘something’ happily pay a chosen few to conquer and enslave the remainder, thus producing the opposite effect.

Capitalism can refer to either functions or biases, functions or ideologies.

Capitalism as a set of institutions, incentives and methods of calculation are with us to stay. The world is adopting them precisely because managed economies lack incentives, information schemes, and calculative tools for quickly utilizing people in an increasingly diverse mix of knowledge and labor, and where that diversity increases the value of people’s productive differences dramatically. Religions and ‘common beliefs’ are for slaves and farmers whose land is more marginally different than that of their human workers.

Capitalism as an ideology, or bias, of Laissez Faire that exports knowledge, resource, human and intellectual capital as a means of politically converting the rest of the world is dead. Not because of opinion, but because the need to convert the world has been soundly demonstrated and the institutions adopted.

But social democracy’s policies and devices which burden future generations, rely upon constant aggressive economic expansion, rely upon credit money to fuel consumption rather than productive innovation, and apply disincentive to savings, is just as dead, although not quite yet as in evidence.

The west takes too much credit for it’s political programs, and too little for the gift of profiting from the filling of a continent with risk takers. There is no more magic to the western miracle than there is to the california miracle, and the two philosophies were advantageous, if temporary.

Capitalism as a set of institutions works in increasing populations because it is a means of managing and rewarding people where no human or set of humans can understand the vast complexity in time and productivity. Capitalism as a bias is simply a foolish failure to understand that capitalism isn’t a bias or philosophy but a set of mechanical tools that assist us in working together in increasing numbers.

The question is: why don’t more governments create positive incentives (credit and profit sharing) for private sector profit applied to public ends rather than negative incentives (class warfare and taxes) that make private activities less rewarding and pit the private sector against the state?

Humans exist in diverse beliefs, classes, abilities. All prosperity comes from risk taking by people with specialized knowledge and who can coordinate capital from numbers of others toward a common end. The state can become ‘creative’ by investing (not spending, but investing) in those things that private capital cannot coordinate: infrastructure.

But if class war continues it will not be the leftist panacea, or even the european socialist model that prevails. It cannot be. An aging minority population has no means of preserving its productive status. And if the loss of that status appeals to you, in fulfillment of your sense of unfairness – a biological but not rational bias -, then you might consider visiting the third world. Because you will soon be living there.

We need to alter government so that each class serves the other, while recognizing that we will always have status and classes. It turns out it’s possible. And it’s not even that hard.

While we can redistribute our excesses, what we can redistribute is only what it is possible to do, without the inter-temporal loss of incentives, and without such interference in calculation of the use of property (objects one has understanding of possible utilities) that the groups (state’s) productivity provides it less purchasing power than competitive groups.

One difference between group preferences is in the capitalization or consumption of behavioral discipline (saving or learning), and therefore some desire to consume cultural discipline and offload responsibility onto future generations. This has turned out to be very common under democracy.

Another issue is status, which we tend to think of as economic, but it is largely a function of mating ritual, and as such will be eternally with us.

So we will have capitalism, in the sense that we will have calculative institutions and status differences. We will have redistribution, because it is simply easier to get along if we do so. But we will not have agreement on that as long as government can profit and increase in size by profiting from class warfare. The only way to fix this is not by ideology but by increasing the calculability and record of causality in the finance, tax and credit system that will make political deceptions, errors, and philosophical differences, either commensurable or impossible. And secondly by using the private sector for public good rather than the private sector trying to keep the state at bay.

India is doing the best at this today I think.

Entrepreneurs will just as happily serve common interests as interests that are opportunistic, if they are able to profit from it.

Share this:

Like this:

POLITICAL PHILOSOPHY
Whether you call us Aristotelians, Machiavellians, Nietzscheians, or some other label, is immaterial – save to say that in doing so you attempt to make equal a difference between approaches to politics and economics that is anything but equal.

Those of us in this school of thought, study what men do and why, what they have done, and why, in it’s entirety, across civilizations and across time, and from that study propose incremental solutions based on that analysis, rather than postulate a utopian model that assumes how men should or could act, if they were something other than human beings with the record of doing what they have done.

And if you wish to say we have class philosophy I would agree at least to one meaning of that statement. Classes are part of the division of knowledge and labor. And like religion they are very difficult to cross philosophically – even if we can cross them economically. And all philosophies are class philosophies. They must be. Universal philosophies that prescribe solutions for multiple classes, or that attempt to ally a set of classes, ask by doing so, that we allow one class to prosper – and to do so at the expense of another.

So yes, to use this method of study is Aristotelian, Machiavellian, and Nietzcheian. And yes it is the philosophy of antiquarian nobility, in the sense that it’s authors hail from the Aristotelian tradition, and that as a work of men from Nobility, and a managerial philosophy, and even perhaps a paternal one, it is a Noble class’ philosophy. But it is not a philosophy of the Noble class in the sense that it attempts to favor a noble class at the expense of others. It simply states that there will always be a governing class, or at least a conflict between different classes who are in political control of a society at one time or another, and that regardless of who is in control, the betterment of most is it’s goal – over time, even if that timeliness is a resistance to perceptible material change to some segment of society, and it is for the betterment and perpetuation of the existing social order. And this difference in preference for outcomes is the difference in class philosophies. The reason being that these people see the fragility of political systems, and with knowledge of the impact of non-gradual change, as detrimental to all.

That being said, this is also the only method of reasoning that can be construed as political science – the rest of the methods are philosophies or religions by analysis of their methods. And any other comparison is a comparison between religion, philosophy and science. Just as any comparison between Aristotelian, Confucian, and Zoroastrian traditions are differences between scientific, philosophical, and religious traditions. These differences are more than tastes. They are materially different approaches to the problem of organizing large numbers of people that arose in the transition to urban life under the technology and economy of farming, and the necessary inequality that resulted from the division of labor, increased production, and specialization that occurred because of that transition.

And if our method is not a science, at least it is the most scientific of methods we have yet found, without first solving the problem of the social sciences – the problem of induction: which is the process of invention of the unknown. Whereas science, as we mean and use the term, is the name we give to the process and method of DISCOVERY, instead of the process of INVENTION. When what we should strive to do, is use the term science to apply to a process where we examine what is, and how it works, rather than how we, in our ignorance, propose that it should be.

And we should abandon and refute simplistic utopian strategies knowing what they are: simplistic and utopian. Developing solutions that propose incremental evolution from the analysis of the record of human activity is much more complicated than proposing utopian models – a minor improvement over the spirit worlds or religious myths of our past. And such incremental methods do not promise quick or easy results. However, it is the most scientific, as well as the most likely to succeed, at the lowest possible damage to the set of alliances and habits we use to work together to produce the standard of living that we do possess, rather than the one we might possess if men were not men and did not act as they have, and could by some mystery or magic, adhere to some utopian concept, whose author proposed as a static universe, instead of one where each person in each class, struggled to increase his happiness and status and material well being for himself and his alliances, friends, and family on a daily basis. And where classes and the people in them, rotate and shift, albeit slowly.

CURRENT TRENDS
Men will not cease using credit to manage society. It is the only tool that is sufficient to manage a group of people in a complex division of labor. Religion is for slaves and peasants. Violence is for slaves and peasants. Law is for farmers, slaves and peasants and urbanites. But laws, religion and violence require comparatively simple epistemologies: everyone must share them and know them for them to function as socially cohesive strategies. Furthermore, citizens, or group members, can opt out of adherence to them and must be ‘caught’ in doing so, and punished for doing so. Credit performs this function because it is a superior enticement in a complex society, rather than a threat, and it’s also much more granular: effectively making laws on an individual by individual basis and creating a social order out of economic participation without prescribing a static set of behaviors. In other words, credit is the most evolutionary of political systems because it can apply to each individual differently, while providing socially conforming pressures.

Men will not cease using monetary policy – fiat money. Because monetary policy performs redistribution, as well as mutual insurance for members of the group, or state. We can argue about different economic and political nuances, but if we see these tools as technologies they are needed technologies whose function and methods need constant improvement.

Therefore, while I am a member of that group of people who study what men have done in the Aristotelian and Machiavellian tradition, and in particular, I am an Austrian (a user of narrative who studies history and behavior), and a libertarian (a person who understands that prosperity comes from freedom, property and trade) and an Anarchist (a person who studies how men act, so that government can be optimized) I am also a Keynesian in the sense that I believe that credit money, like the technologies of real money, accounting, numbers, and writing – and like laws and science and religion and philosophy – is a necessary – not preferential but necessary – part of human existence if we are to live in large numbers and continue our transition from farming society to urban society,

And I expressly am not a libertarian if that means that I am promoting the development of a banking class that profiteers from privatizing wins and socializing losses. That is no different from a priestly or bureaucratic class, or a thieving peasant class that takes from one group for it’s own use. I am a libertarian in that I do not believe a person in government can be wiser than I am. I do not disavow some form of redistribution either. I simply claim that the way we conduct it today is damaging to society, and empowers a degenerate and devolutionary government, and that a better solution to this problem is achievable, and that I know what that solution is.

And we are very close to it now. The solution is incremental. It can be implemented. It may not even be that complicated in concept or in implementation. But understanding why such things will work, and abandoning our little class philosophies, each of which seeks to bend government for our class’ benefit at the expense of others, or those that seek to make something from nothing, or those that seek security from the illusion of the state, so that they can live at the expense of others, is no small undertaking. Because we have created a nice little set of cherished myths, the primary purpose of which was to wrest control from land holders, churches and kings, and transfer it to bankers and politicians. And we will need to abandon some of those cherished myths.

Share this:

Like this:

In May, one of my business partners asked me to rescue a bit of software development that was a joint venture between a prominent politician’s environmental activism foundation, a very large software company, and one of our smaller businesses.

It took me until July to weed through two years of chaos and deception to understand that we were losing millions on the effort, that neither customer was being honest with us, or even with each other, and that the entire effort was a financial and political catastrophe. Besides that the software was unusable. Not for want of technical talent. It’s was because the politicians mistakenly believed that they could be product managers – skills that are incompatible.

I’ve spent the late spring and most of the summer building a new business and attempting to right the many wrongs done by these people, to our company and others, in particular, to a global organization named ICLEI, which consists of local governments working to reduce greenhouse gas emissions.

Now, I am not a climate activist, and I’m actually a skeptic. It’s not that I don’t want to reduce emissions. I do.

But the reason I got involved was because I simply cannot morally tolerate myself, my business partners, and some very good, and hard working environmental activists, who are simply trying to make the world into a better place, get walked on by denizens of the evil empire whose only real purpose seems to be giving capitalism a bad name, while in the mean time, harming their company’s brand, and all for personal ambitions.

So, my work on Capitalism 3.0 has been delayed because I’ve had to launch a new business, and right what I feel are injustices by doing so. It seems that it’s acceptable to the Green movement to have a skeptical capitalist involved as long as he’s on their side. A marriage of convenience so to speak.

All I know is that I haven’t met anyone involved in the climate issue that isn’t a good person. And I can’t say that for the people who caused me to get involved by their errant and greedy behavior – masked as activism. I find them insufferable.

So those political activists both left and right, who look at me askance when I tell them I am a major stockholder in a Green business, should understand that you have your religions and I have mine: I don’t like to see people abused, and especially under the cloak of public service.